One reason the White House, Congress and the presidential candidates are talking so easily nowadays about tinkering with the U.S. economy is that economic experts have already endorsed the concept of such short-term measures.
Former Treasury Secretary Larry Summers has suggested a number for how much would be required to soften a potential recession. Nobel Prize winner Joseph Stiglitz has spoken about tax rebates. President George W. Bush, briefed by experts, may take up the stimulus concept as early as this week. In coming months, the candidates will lean hard on the experts as they battle over questions such as whether the next middle-class tax credit should be refundable (Democrats), or not (Republicans).
This is perverse. The real question about tinkering should not be “how?” but “why?” The persistence of the stimulus habit, and the endorsements by experts, makes it worthwhile to review such previous interventions and their consequences.
Back in the early 1990s, great economies confronted trouble. The savings-and-loan crisis, a recession and disappointing productivity numbers all darkened the U.S. future. In Japan, banks were foundering, and the real estate bubble had popped. The Nikkei stock index was plunging.
Under the advice of economists such as Labor Secretary Bob Reich, a new U.S. president, Bill Clinton, was considering short-term action, both for his own country and for Japan. Clinton staffers talked about a $10 billion or $15 billion outlay, or maybe a little more.